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Canadian GDP growth of 4.5% for the second quarter was the strongest growth in six years. Yields for 10 year Canadian bonds and preferred shares moved in sync, the preferreds with dividend rates tied to the Government of Canada 90 day T-Bill rate were up 0.3%, for issues tied to the 5 year Government of Canada yields. There were no change in price and the perpetual preferred shares were down 0.3%. Canadian 10 year bond yields were 4 basis points higher.

The jump in GDP pulled the Canadian dollar higher, compared the US dollar on expectation the Bank of Canada will raise interest rates by one quarter of a point. The commentary this week focuses on the longer term GDP growth and the Canadian-US dollar exchange rate trends to put the current GDP uptick in perspective. We also consider where the Canadian dollar and yields are going from here.